Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):

The condensed consolidated financial statements included herein have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). Certain information and footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted pursuant to such rules and regulations, although
we believe that the disclosures are adequate to make the information presented not misleading.
These condensed consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in our latest annual report on
Form 10-K.

In our opinion, the accompanying unaudited condensed consolidated financial statements include all
adjustments (consisting of only normal recurring accruals) necessary to present fairly the
financial position and the results of operations and cash flows for the periods presented. Our
interim results as presented in this Form 10-Q are not necessarily indicative of the operating
results for the entire year.

The condensed consolidated financial statements were prepared using accounting principles generally
accepted in the United States (GAAP). These principles require us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities and the reported amounts of revenues and expenses. Actual results could differ from
those estimates.

Our first fiscal quarter ends on the Saturday closest to March 31. The 2010 and 2009 first
quarters ended on April 3, 2010 and April 4, 2009, respectively. All references to years in these
notes to condensed consolidated financial statements represent the three months ended of the first
fiscal quarter, respectively, unless otherwise noted.

Recently Adopted Accounting Pronouncements

On January 3, 2010 we adopted Accounting Standards Update (ASU) 09-16, Accounting for Transfers of
Financial Assets, which among other things creates more stringent conditions for reporting a
transfer of a portion of a financial asset as a sale. The adoption of ASU 09-16 did not have a
material impact on our consolidated financial statements.

In January 2010, ASU 10-06, Improving Disclosures about Fair Value Measurements, was issued and
amends ASC 820, Fair Value Measurements and Disclosures. This ASU requires disclosures of
transfers into and out of Levels 1 and 2, more detailed roll forward reconciliations of Level 3
recurring fair value measurements on a gross basis, fair value information by class of assets and
liabilities, and descriptions of valuation techniques and inputs for Level 2 and 3 measurements.
We adopted ASU 10-06 during the first quarter 2010, which did not have a material impact on our
consolidated financial statements.

On February 24, 2010, ASU 10-09, Subsequent Events (Topic 855): Amendments to Certain Recognition
and Disclosure Requirements, was issued, which amends ASC 855-10 to eliminate contradictions
between the requirements of U.S. GAAP and the SECs filing rules. The amendments also discharge the
requirement that public companies disclose the date of their financial statements in both issued
and revised financial statements. ASU 10-09 is effective upon issuance and did not have a material
impact on our consolidated financial statements.

(2) Acquisitions

On January 4, 2010, we completed the purchase of 100% of the outstanding common shares of IMC
Health Care, Inc. (IMC), a provider of employer sponsored on-site health centers. The acquisition
of IMC expanded our employer health initiatives, such as on-site employer health centers, occupational
health services and wellness programs. Consideration for this transaction was $15.7 million in cash
plus additional contingent consideration, which is payable if we achieve certain revenue milestones
during the fiscal year 2010 from the clients acquired from IMC. We valued the contingent
consideration at $1.7 million based on a probability-weighted assessment of potential contingent
consideration payment scenarios ranging up to $2.5 million. The allocation of the purchase price
to the estimated fair values of the identified tangible and intangible assets acquired, net of
liabilities assumed, is summarized below:

The fair values of the acquired intangible assets and the contingent consideration were
estimated by applying the income approach. Such estimations required the use of inputs that were
unobservable in the market place (Level 3), including a discount rate that we estimated would be
used by a market participant in valuing these assets, projections of revenues and cash flows,
probability weighting factors and customer attrition rates. See Note 3 for further information
about the fair value level hierarchy.

The goodwill was allocated to our Domestic operating segment and is expected to be deductible for
tax purposes. The intangible assets are being amortized over five years. The operating results of
IMC were combined with our operating results subsequent to the purchase date of January 4, 2010.
Pro-forma results of operations have not been presented because the effect of this acquisition was
not material to our results.

(3) Fair Value Measurements

We determine fair value measurements used in our condensed consolidated financial statements based
upon the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value hierarchy
distinguishes between (1) market participant assumptions developed based on market data obtained
from independent sources (observable inputs) and (2) an entitys own assumptions about market
participant assumptions developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair
value hierarchy are described below:



Level 1  Valuations based on quoted prices in active markets for identical assets or
liabilities that the entity has the ability to access.



Level 2  Valuations based on quoted prices for similar assets or liabilities, quoted
prices in markets that are not active, or other inputs that are observable or can be
corroborated by observable data for substantially the full term of the assets or
liabilities.



Level 3  Valuations based on inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities.

The following table details our financial assets measured at fair value within the fair value
hierarchy:

Our auction rate securities have been classified as Level 3 assets within the fair value
hierarchy, as their valuation requires substantial judgment and estimation of factors that are not
currently observable in the market due to the lack of trading in the securities. If different
assumptions were used for the various inputs to the valuation, including, but not limited to,
assumptions involving the estimated holding periods for the auction rate securities, the estimated
cash flows over those estimated lives, and the estimated discount rates, including the liquidity
discount rate, applied to those cash flows, the estimated fair value of these investments could be
significantly higher or lower than the fair value we determined.

The table below presents the activity of our assets measured at fair value on a recurring basis
using significant unobservable inputs (Level 3):

Three Months Ended

(In thousands)

2010

2009

Beginning balance

$

94,550

$

105,300

Redemptions at par

(6,400

)

(5,700

)

Unrealized gain on auction rate securities included in earnings

1,323

6,290

Unrealized loss on put-like feature included in earnings

(1,323

)

(6,290

)

Ending balance

$

88,150

$

99,600

We classify our long-term, fixed rate debt as a long-term liability on the balance sheet and
estimate the fair value using a Level 3 discounted cash flow analysis based on our current
borrowing rates for debt with similar maturities. The fair value of our long-term debt, including
current maturities, was approximately $120.8 million at April 3, 2010.

(4) Receivables

Receivables consist of accounts receivable and contracts receivable. Accounts receivable represent
recorded revenues that have been billed. Contracts receivable represent recorded revenues that are
billable by us at future dates under the terms of a contract with a client. Billings and other
consideration received on contracts in excess of related revenues recognized are recorded as
deferred revenue. Substantially all receivables are derived from sales and related support and
maintenance and professional services of our clinical, administrative and financial information
systems and solutions to healthcare providers located throughout the United States and in certain
non-U.S. countries.

We perform ongoing credit evaluations of our clients and generally do not require collateral from
our clients. We provide an allowance for estimated uncollectible accounts based on specific
identification, historical experience and our judgment. Provisions for losses on uncollectible
accounts for the first three months of 2010 and 2009 totaled $5.6 million and $0.7 million,
respectively. A summary of net receivables is as follows:

April 3, 2010

January 2, 2010

(In thousands)

Gross accounts receivable

$

319,751

$

342,992

Less: Allowance for doubtful accounts

21,787

16,895

Accounts receivable, net of allowance

297,964

326,097

Contracts receivable

125,071

135,314

Total receivables, net

$

423,035

$

461,411

During the second quarter of 2008, Fujitsu Services Limiteds (Fujitsu) contract as the prime
contractor in the National Health Service (NHS) initiative to automate clinical processes and
digitize medical records in the Southern region of England was terminated by the NHS. This had the
effect of automatically terminating our subcontract for the project. We are in dispute with
Fujitsu regarding Fujitsus obligation to pay the amounts comprised of accounts receivable and
contracts receivable related to that subcontract, and we are working with Fujitsu to resolve these issues
based on processes provided for in the contract. Part of that process requires resolution of
disputes between Fujitsu and the NHS regarding the contract termination. As of April 3, 2010, it
remains unlikely that the matter will be resolved in the next 12 months. Therefore these
receivables have been classified as long-term and represent the significant majority of other
long-term assets as of the first quarter ended April 3, 2010. While the ultimate collectability of
the receivables pursuant to this process is uncertain, we believe that we have valid and equitable
grounds for recovery of such amounts and that collection of recorded amounts is probable.

During the first three months of 2010 and 2009, we received total client cash collections of $483.7
million and $457.7 million, respectively, of which $18.7 million and $10.2 million were received
from third party arrangements with non-recourse payment assignments.

(5) Income Taxes

We determine the tax provision for interim periods using an estimate of our annual effective tax
rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each
quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate
changes we make a cumulative adjustment. We classify interest and penalties associated with
unrecognized tax benefits as income tax expense in our Condensed Consolidated Statements of
Operations.

The Companys effective tax rate was 35% for the first quarter of 2010 and 34% for the first
quarter of 2009. This increase is primarily due to the research and development tax credit not
being extended for the 2010 tax year.

During the first quarter of 2010, the Internal Revenue Service commenced its examination of the
2008 income tax return. We do not believe this examination will have a material effect on our
financial position, results of operations or liquidity.

Other than the aforementioned matter, we do not anticipate any settlements of the remaining
unrecognized tax benefits within the next 12 months.

(6) Earnings Per Share

Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to
common shareholders by the weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or other contracts to
issue stock were exercised or converted into common stock or resulted in the issuance of common
stock that then shared in our earnings. A reconciliation of the numerators and the denominators of
the basic and diluted per share computations are as follows:

Three Months Ended

2010

2009

Earnings

Shares

Per-Share

Earnings

Shares

Per-Share

(Numerator)

(Denominator)

Amount

(Numerator)

(Denominator)

Amount

(In thousands, except per share data)

Basic earnings per share:

Income available to common
stockholders

$

50,286

81,957

$

0.61

$

40,830

80,333

$

0.51

Effect of dilutive securities:

Stock options

-

3,148

-

2,524

Diluted earnings per share:

Income available to common stockholders
including assumed conversions

$

50,286

85,105

$

0.59

$

40,830

82,857

$

0.49

Options to purchase 0.2 million and 3.1 million shares of common stock at per share prices
ranging from $58.21 to $85.51 and $33.63 to $136.86 were outstanding at the three months ended
April 3, 2010 and April 4, 2009, respectively, but were not included in the computation of diluted earnings
per share because the options were anti-dilutive.

(7) Share-Based Compensation

On March 12, 2010 approximately 115,000 stock options were granted to executive officers and other
executive level associates under our Long-Term Incentive Plan F. These awards will vest 40% on
March 12, 2012, and 20% will vest on March 12, 2013, 2014 and 2015. The fair value of each of these
awards was $44.89 per award. Total compensation expense related to these awards is $5.1 million,
which is expected to be recognized over a period of 5 years.

The following table presents the total compensation expense recognized in the condensed
consolidated statements of operations with respect to stock options, nonvested shares and Associate
Stock Purchase Plan shares:

Amounts capitalized in software development costs, net of amortization

(44

)

(65

)

Amounts charged against earnings, before income tax benefit

$

5,507

$

3,920

Amount of related income tax benefit recognized in earnings

$

2,051

$

1,460

As of April 3, 2010, there was $48.4 million of total unrecognized compensation cost related
to stock options granted under all plans. That cost is expected to be recognized over a
weighted-average period of 2.99 years.

(8) Comprehensive Income

Total comprehensive income, which includes net earnings, foreign currency translation adjustments,
and gains and losses from a hedge of our net investment in the United Kingdom (U.K.), amounted to
$43.6 million and $35.6 million for the three months ended April 3, 2010 and April 4, 2009,
respectively. None of the items within comprehensive income, including net earnings, relate to
non-controlling interests.

As of April 3, 2010, we designated all of our Great Britain Pound (GBP) denominated long-term debt
as a net investment hedge of our U.K. operations. The objective of the hedge is to reduce our
foreign currency exposure in the U.K. subsidiary investment. Changes in the exchange rate between
the United States Dollar (USD) and GBP, related to the notional amount of the hedge, are recognized
as a component of accumulated other comprehensive income (loss), to the extent the hedge is
effective.

The following table represents the fair value of the net investment hedge included within the
Condensed Consolidated Balance Sheets and the related unrealized gain or loss, net of related
income tax effects:

(In thousands)

Net Unrealized Gain (Loss)

Balance Sheet

Fair Value

For the Three Months Ended

Derivatives designated

Classification

April 3, 2010

January 2, 2010

2010

2009

Net investment hedge

Short-term liabilities

$

14,120

$

15,015

$

562

$

(171

)

Net investment hedge

Long-term liabilities

70,599

75,075

2,808

(1,024

)

Total net investment hedge

$

84,719

$

90,090

$

3,370

$

(1,195

)

We recognize foreign currency transaction gains and losses within the Condensed Consolidated
Statements of Operations as a component of general and administrative expenses. We realized a
foreign currency loss of $0.02 million and a gain of $5.5 million during the three months ended
April 3, 2010 and April 4, 2009, respectively.

(9) Contingencies

The terms of our software license agreements with our clients generally provide for a limited
indemnification of such intellectual property against losses, expenses and liabilities arising from
third party claims based on alleged infringement by our solutions of an intellectual property right
of such third party. The terms of such indemnification often limit the scope of and remedies for
such indemnification obligations and generally include a right to replace or modify an infringing
solution. To date, we have not had to reimburse any of our clients for any losses related to these
indemnification provisions pertaining to third party intellectual property infringement claims.
For several reasons, including the lack of prior indemnification claims and the lack of a monetary
liability limit for certain infringement cases under the terms of the corresponding agreements with
our clients, we cannot determine the maximum amount of potential future payments, if any, related
to such indemnification provisions.

From time to time we are involved in routine litigation incidental to the conduct of our business,
including for example, employment disputes and litigation alleging solution defects, intellectual
property infringement, violations of law and breaches of contract and warranties. We believe that
no such routine litigation currently pending against us, if adversely determined, would have a
material adverse effect on our consolidated financial position, results of operations or cash
flows.

We have two operating segments, Domestic and Global. Revenues are derived primarily from the sale
of clinical, financial and administrative information systems and solutions. The cost of revenues
includes the cost of third party consulting services, computer hardware and sublicensed software
purchased from computer and software manufacturers for delivery to clients. It also includes the
cost of hardware maintenance and sublicensed software support subcontracted to the manufacturers.
Operating expenses incurred by the geographic business segments consist of sales and client service
expenses including salaries of sales and client service personnel, communications expenses and
unreimbursed travel expenses. Performance of the segments is assessed at the operating earnings
level and, therefore, the segment operations have been presented as such. Other includes
expenses such as software development, marketing, general and administrative, share-based
compensation expense and depreciation that have not been allocated to the operating segments. It
is impractical for us to track assets by geographical business segment.

Accounting policies for each of the reportable segments are the same as those used on a
consolidated basis. The following table presents a summary of the operating information for the
first quarters of 2010 and 2009.

Managements Discussion and Analysis of Financial Condition and Results of
Operations

The following Management Discussion and Analysis (MD&A) is intended to help the reader understand
the results of operations and financial condition of Cerner Corporation (Cerner, the Company, we,
us or our). This MD&A is provided as a supplement to, and should be read in conjunction with, our
condensed consolidated financial statements and the accompanying notes to the financial statements
(Notes) found above.

Our first fiscal quarter ends on the Saturday closest to March 31. The 2010 and 2009 first
quarters ended on April 3, 2010 and April 4, 2009, respectively. All references to years in these
notes to consolidated financial statements represent the respective three months ended of the first
fiscal quarters, unless otherwise noted.

Except for the historical information and discussions contained herein, statements contained in
this Form 10-Q may constitute forward looking statements within the meaning of Section 21E of the
Securities and Exchange Act of 1934, as amended (the Act). Forward-looking statements can often be
identified by the use of forward-looking terminology, such as could, should, will,
intended, continue, believe, may, expect, hope, anticipate, goal, forecast,
plan, guidance or estimate or the negative of these words, variations thereof or similar
expressions. These statements involve a number of risks, uncertainties and other factors that
could cause actual results to differ materially, including: the possibility of product-related
liabilities; potential claims for system errors and warranties; the possibility of interruption at
our data centers or client support facilities; our proprietary technology may be subject to claims
for infringement or misappropriation of intellectual property rights of others, or may be infringed
or misappropriated by others; risks associated with our non-U.S. operations; risks associated with
our ability to effectively hedge exposure to fluctuations in foreign currency exchange rates; the
potential for tax legislation initiatives that could adversely affect our tax position and/or
challenges to our tax positions in the United States and non-U.S. countries; risks associated with
our recruitment and retention of key personnel; risks related to our reliance on third party
suppliers; risks inherent with business acquisitions; changing political, economic and regulatory
influences; government regulation; significant competition and market changes; risks associated
with the ongoing adverse financial market environment and uncertainty in global economic
conditions; variations in our quarterly operating results; potential inconsistencies in our sales
forecasts compared to actual sales; volatility in the trading price of our common stock; the
authority of our Board of Directors to issue preferred stock and anti-takeover provisions contained
in our corporate governance documents; and, other risks, uncertainties and factors discussed
elsewhere in this Form 10-Q, in our other filings with the Securities and Exchange Commission or in
materials incorporated therein by reference. Forward looking statements are not guarantees of
future performance or results. We undertake no obligation to update or revise forward-looking
statements to reflect changed assumptions, the occurrence of unanticipated events or changes in
future operating results, financial condition or business over time.

Management Overview

Our revenues are primarily derived by selling, implementing and supporting software solutions,
clinical content, hardware, healthcare devices and services that give healthcare providers secure
access to clinical, administrative and financial data in real time, allowing them to improve the
quality, safety and efficiency in the delivery of healthcare. We implement the healthcare solutions
as stand-alone, combined or enterprise-wide systems. Cerner Millennium®software solutions can be
managed by our clients or in our data center via a managed services model.

Our fundamental strategy centers on creating organic growth by investing in research and
development (R&D) to create solutions and services for the healthcare industry. This strategy has
driven strong growth over the long-term, as reflected in five- and ten-year compound annual revenue
growth rates of 13% or more. This growth has also created a very strategic footprint in
healthcare, with Cerner®solutions licensed by over 8,500 facilities, including approximately 2,300
hospitals; 3,400 physician practices with over 30,000 physicians; 600 ambulatory facilities, such
as laboratories, ambulatory centers, cardiac facilities, radiology clinics and surgery centers; 700
home health facilities; and 1,500 retail pharmacies. Selling additional solutions back into this
client base is an important element of our future revenue growth. We are also focused on driving
growth through market share expansion by replacing competitors in healthcare settings that are
looking to replace their current healthcare information technology (HIT) partners or those who have
not yet strategically aligned with a supplier. We expect the Health Information Technology for
Economic and Clinical Health (HITECH) provisions in the American Recovery and Reinvestment Act
(ARRA) will create a period of increased demand within the United States during which we believe we
can gain additional market share. We also expect to drive growth through new initiatives and
services that reflect our ongoing ability to innovate and expand our reach into healthcare.
Examples of these include our CareAware®healthcare device architecture and devices, Healthe
employer services, Cerner ITWorksSM services, Cerner RevWorksSM services,
physician practice solutions and solutions and services for the pharmaceutical market. Finally, we
are focused on selling our solutions and services outside of the United States. Many non-U.S.
markets have a low penetration of HIT solutions and their governing bodies are in many cases
focused on HIT as part of their strategy to improve the quality and lower the cost of healthcare.

Beyond our strategy for driving revenue growth, we are also focused on earnings growth. Similar to
our history of growing revenue, our net earnings have increased at more than 20% compound annual
rates over five- and ten-year periods. We believe we can continue driving strong levels of
earnings growth while also leveraging key areas to create operating margin expansion. The primary
areas of opportunity for margin expansion include:



becoming more efficient at implementing our software by leveraging implementation tools
and methodologies we have developed that can reduce the amount of effort required to
implement our software;



leveraging our investments in R&D by addressing new market that do not require
significant incremental R&D but can contribute significantly to revenue growth; and



leveraging our scalable business infrastructure to reduce the rate of increase in
general and administrative spending to below our revenue growth rate.

We are also focused on increasing cash flow by growing earnings, reducing the use of working
capital and controlling capital expenditures.

Healthcare Information Technology Market

The lingering downturn in the worldwide economy has impacted almost all industries. While
healthcare is not immune to economic cycles, we believe it is more resilient than most segments of
the economy. The impact of the current economic conditions on our existing and prospective clients
has been mixed. Some organizations are doing well operationally, but others face challenges such as
higher levels of uninsured patients and Medicaid payments being impacted by the weakened financial
condition of state governments.

We believe the result of these challenges is that healthcare organizations are focusing on
strategic spending that generates a return on their investment. Because HIT solutions play an
important role in healthcare by improving safety, efficiency and reducing cost, they are often
viewed as more strategic than other potential purchases. Most healthcare providers also recognize
that they must invest in HIT to meet regulatory, compliance and government reimbursement
requirements.

Overall, while the economy has certainly impacted and could continue to impact our business, we
believe there are several macro trends that are favorable for the HIT industry. One example is the
need to curb the growth of United States healthcare spending, which analysts from the Centers for
Medicare and Medicaid Services estimate at $2.5 trillion or 17.3 percent of Gross Domestic Product
in 2009. In the United States, politicians and policymakers agree that the growing cost of our
healthcare system is unsustainable. Leaders of both parties say the intelligent use of information
systems will improve health outcomes and, correspondingly, drive down costs. They cite a 2005 study
by RAND Corp., which estimated that the widespread adoption of HIT in the United States could cut
healthcare costs by $162 billion annually.

In 2009, the broad recognition that HIT is essential to helping control healthcare costs
contributed to the inclusion of HIT incentives in the ARRA. The HITECH provisions within ARRA
include more than $35 billion to incent healthcare organizations to modernize operations through
the acquisition and wide-spread use of HIT. We believe ARRA could represent the single biggest
United States HIT opportunity in our 30 years as a company. With our large footprint in United
States hospitals and physician practices, together with our proven ability to deliver value, we
believe the Company is well-positioned to benefit from these incentives over the next several
years.

Another dynamic in the United States marketplace is broader federal healthcare reform and
uncertainty about how the legislation will impact the industry. While this creates some near-term
uncertainty for healthcare providers, we believe HIT continues to be viewed as a transformational
agent that is essential in all scenarios of reform.

Outside of the United States, the economy has impacted and could continue to impact our results in
almost all regions. However, we believe revenue growth opportunities outside the United States
remain significant because other countries are also grappling with increased healthcare spending,
safety concerns and inefficient care, and many of these countries recognize HIT as an important
part of the solution to these issues.

In summary, while the current economic environment has impacted our business, the fundamental value
proposition of HIT remains strong. The HIT industry will likely benefit as healthcare providers and
governments continue to recognize that these solutions and services contribute to safer, more
efficient healthcare.

Results Overview

The Company delivered strong levels of bookings, earnings and cash flows in the first quarter of
2010. New business bookings revenue, which reflects the value of executed contracts for software,
hardware and professional services and managed services, was $404.9 million in the first quarter of
2010, which was an increase of 22% compared to $332.8 million in the first quarter of 2009.
Revenues for the first quarter of 2010 increased 10% to $431.3 million compared to $392.3 million
in the year-ago quarter. The year-over-year increase in revenue in the first quarter reflects
slightly better economic conditions and some early demand driven by the stimulus incentives
provided by the HITECH provisions within the ARRA.

First quarter 2010 net earnings were $50.3 million and diluted earnings per share were $0.59.
First quarter 2009 net earnings were $40.8 million and diluted earnings per share were $0.49. First
quarter 2010 and 2009 net earnings and diluted earnings per share reflect the impact of
shared-based compensation expense. Share-based compensation expense reduced first quarter 2010 net
earnings and diluted earnings per share by $3.5 million and $0.04, respectively, and first quarter
2009 earnings and diluted earnings per share by $2.5 million and $0.03, respectively.

We had strong cash collections of receivables of $483.7 million in the first quarter of 2010
compared to $457.7 million in the first quarter of 2009. Days sales outstanding decreased to 89
days in the first quarter of 2010 compared to 90 days in the fourth quarter 2009 and 102 days in
the first quarter of 2009. The majority of the year-over-year decline is driven by the
reclassification of our Fujitsu receivable to other long term assets during the fourth quarter of
2009, which is not included in our days sales outstanding calculation. Operating cash flows for the
first quarter of 2010 were strong at $105.5 million compared to $97.8 million in the first quarter
of 2009.

The following table presents a summary of the operating information for the first quarters of 2010
and 2009:

% of

% of

(in thousands)

2010

Revenue

2009

Revenue

% Change

Revenues

System sales

$

116,951

27

%

$

100,189

26

%

17

%

Support and maintenance

127,106

29

%

124,493

32

%

2

%

Services

179,939

42

%

159,335

41

%

13

%

Reimbursed travel

7,341

2

%

8,305

2

%

-12

%

Total revenues

431,337

100

%

392,322

100

%

10

%

Costs of revenue

Costs of revenue

68,084

16

%

65,531

17

%

4

%

Total margin

363,253

84

%

326,791

83

%

11

%

Operating expenses

Sales and client

187,593

43

%

173,353

44

%

8

%

Software development

66,779

15

%

64,736

17

%

3

%

General and administrative

33,225

8

%

26,722

7

%

24

%

Total operating expenses

287,597

67

%

264,811

67

%

9

%

Total costs and expenses

355,681

82

%

330,342

84

%

8

%

Operating earnings

75,656

17.5

%

61,980

15.8

%

22

%

Interest income (expense), net

1,783

(321

)

Other income (expense), net

(76

)

204

Income taxes

(27,077

)

(21,033

)

Net earnings

$

50,286

$

40,830

23

%

Revenues & Backlog

Revenues increased 10% to $431.3 million for the first quarter 2010 from $392.3 million for the
same period in 2009.



System sales, which include revenues from the sale of software, technology resale
(hardware and sublicensed software), deployment period licensed software upgrade rights,
installation fees, transaction processing and subscriptions, increased 17% to $117.0
million for the first quarter of 2010 from $100.2 million for the same period in 2009. The
increase in system sales
was driven by a strong increase in licensed software, partially offset by a decline in
technology resale revenue.



Support and maintenance revenues increased 2% to $127.1 million during the first quarter
of 2010 from $124.5 million during the same period in 2009. The increase is attributable
to growth in Cerner Millennium applications for which support billing has been initiated.



Services revenue, which includes professional services excluding installation, and
managed services, increased 13% to $179.9 million from $159.3 million for the same period
in 2009. This increase is driven by growth in CernerWorksSM managed services as
a result of continued demand for our hosting services and an increase in professional
services due to increased implementation activities.

Contract backlog, which reflects new business bookings that have not yet been recognized as
revenue, increased 24% in the first quarter of 2010 compared to the same period in 2009. This
increase was driven by growth in new business bookings during the past four quarters, including
continued strong levels of managed services bookings that typically have longer contract terms. A
summary of our total backlog follows:

Cost of revenues was 16% of total revenues in the first quarter of 2010, as compared to 17% in the
same period of 2009. The cost of revenues includes the cost of reimbursed travel expense, third
party consulting services and subscription content, computer hardware and sublicensed software
purchased from hardware and software manufacturers for delivery to clients. It also includes the
cost of hardware maintenance and sublicensed software support subcontracted to the manufacturers.
Such costs, as a percent of revenues, typically have varied as the mix of revenue (software,
hardware, maintenance, support, services and reimbursed travel) carrying different margin rates
changes from period to period. Costs of revenues does not include the costs of our client service
personnel who are responsible for delivering our service offerings, such costs are included in
sales and client service expense.

Operating Expenses

Total operating expenses increased 9% to $287.6 million in the first quarter of 2010, compared with
$264.8 million for the same period in 2009. Share-based compensation expense recognized impacted
expenses as indicated below:

Three Months Ended

(In thousands)

2010

2009

Sales and client service expenses

$

2,368

$

1,709

Software development expense

1,406

1,150

General and administrative expenses

1,733

1,061

Total stock-based compensation expense

$

5,507

$

3,920



Sales and client service expenses as a percent of total revenues were 43% in the
first quarter of 2010 as compared to 44% in the same period of 2009. These expenses
increased 8% to $187.6 million in the first quarter of 2010, from $173.4 million in the
same period of 2009. Sales and client service expenses include salaries of sales and client
service personnel, depreciation and other expenses associated with our CernerWorks managed
service business, communications expenses, unreimbursed travel expenses, expense for
share-based payments, sales and marketing salaries and trade show and advertising costs.
The increase was primarily attributable to growth in the managed services business and an
increase in bad debt expense.



Software development expense increased 3% to $66.8 million for the first quarter of 2010
compared to $64.7 million for the same period in 2009. The small amount of the increase
reflects our ongoing efforts to control spending growth relative to revenue growth. A
summary of our total software development expense is as follows:

Three Months Ended

(In thousands)

2010

2009

Software development costs

$

71,457

$

69,975

Capitalized software costs

(20,282

)

(18,114

)

Capitalized costs related to share-based payments

(234

)

(174

)

Amortization of capitalized software costs

15,838

13,049

Total software development expense

$

66,779

$

64,736



General and administrative expenses as a percent of total revenues were 8%, in the
first quarter of 2010, as compared to 7% for the same period in 2009. These expenses
increased 24% to $33.2 million in the first quarter of 2010, from $26.7 million for the
same period in 2009. General and administrative expenses include salaries for corporate,
financial and administrative staffs, utilities, communications expenses, professional fees,
transaction gains or losses on foreign currency and expense for share based payments. We
recorded a net transaction loss on foreign currency of $0.02 million and a net transaction
gain on foreign currency of $5.5 million in the first quarters of 2010 and 2009,
respectively, which accounted for the majority of the overall increase in general and
administrative expenses.

Net interest income was $1.8 million in the first quarter of 2010 compared to net
interest expense of $0.3 million in the first quarter of 2009. Interest income increased to
$3.7 million in the first quarter of 2010 from $1.7 million for the same period in 2009,
due primarily to growth in investments and an increase in investment returns. Interest
expense decreased to $1.9 million in the first quarter of 2010 from $2.1 million for the
same period in 2009, due primarily to long-term debt payments made in the fourth quarter of
2009.



Other income was $0.1 million in the first quarter of 2010, compared to expense of $0.2
million for the same period in 2009. Other income and expense in the first quarters 2010
and 2009 includes offsetting unrealized gains and losses included in earnings related to
our auction rate securities and put-like settlement feature in the amounts of $1.3 million
and $6.3 million, respectively. Refer to Liquidity and Capital Resources within this MD&A
and Note 3 of the notes to condensed consolidated financial statements for additional
information on our auction rate securities.



Our effective tax rate was 35% for the first quarter of 2010 and 34% for the first
quarter of 2009. This increase is primarily due to the research and development tax credit
not being extended for the 2010 tax year.

Operations by Segment

We have two operating segments, Domestic and Global. The Domestic segment includes revenue
contributions and expenditures associated with business activity in the United States. The Global
segment includes revenue contributions and expenditures linked to business activity in Aruba,
Australia, Austria, Belgium, Canada, Cayman Islands, Chile, China (Hong Kong), Egypt, England,
France, Germany, India, Ireland, Malaysia, Puerto Rico, Saudi Arabia, Singapore, Spain, Sweden,
Switzerland and the United Arab Emirates.

The following table presents a summary of the operating information for the first quarters of 2010
and 2009:

(in thousands)

2010

% of Revenue

2009

% of Revenue

% Change

Domestic Segment

Revenues

$

355,315

100%

$

323,173

100%

10%

Costs of revenue

61,241

17%

54,462

17%

12%

Operating expenses

104,723

29%

89,777

28%

17%

Total costs and expenses

165,964

47%

144,239

45%

15%

Domestic operating earnings

189,351

53%

178,934

55%

6%

Global Segment

Revenues

76,022

100%

69,149

100%

10%

Costs of revenue

6,843

9%

11,069

16%

-38%

Operating expenses

29,713

39%

32,361

47%

-8%

Total costs and expenses

36,556

48%

43,430

63%

-16%

Global operating earnings

39,466

52%

25,719

37%

53%

Other, net

(153,161

)

(142,673

)

7%

Consolidated operating earnings

$

75,656

$

61,980

22%

Domestic Segment



Revenues increased 10% to $355.3 million in the first quarter of 2010 from $323.2
million the same period in 2009. This increase was driven by growth in licensed software,
managed services and professional services.



Cost of revenues remained flat at 17% of revenues in the first quarter of 2010, compared
to the same period in 2009.



Operating expenses increased 17% to $104.7 million in the first quarter of 2010, from
$89.8 million in the same period in 2009, due primarily to growth in managed services and
bad debt expense.

Revenues increased 10% to $76.0 million in the first quarter of 2010 from $69.1 million
in the same period in 2009. This increase was driven by improved licensed software and
support revenue, mostly from the United Kingdom and Middle East regions, as well as a
change in estimates for certain contracts that rely on estimates as part of contract
accounting.



Cost of revenues was 9% of revenues in the first quarter of 2010, compared with 16% in
the same period of 2009. The lower cost of revenues in the first quarter of 2010 was
driven by a decrease in technology resale, which carries a higher cost of revenue.



Operating expenses decreased 8% to $29.7 million for the first quarter of 2010, from
$32.4 million in the same period in 2009, primarily due to a decrease in professional
services expense.

Other, net

Operating results not attributed to an operating segment include expenses, such as software
development, marketing, general and administrative, stock-based compensation and depreciation.
These expenses increased 7% to $153.2 million in the first quarter of 2010 from $142.7 million in
the same period in 2009. This increase was primarily due to growth in corporate personnel costs, as
well as the previously discussed impact of foreign currency transaction gains and losses.

Liquidity and Capital Resources

Our liquidity is influenced by many factors, including the amount and timing of our revenues, our
cash collections from our clients and the amounts we invest in software development, acquisitions
and capital expenditures.

Our principal sources of liquidity are our cash, cash equivalents (which consist of money market
funds), time deposits and bonds with original maturities of less than 90 days and short-term
investments. At April 3, 2010, we had cash of $209.6 million, cash equivalents of $30.6 million
and short-term investments of $368.7 million compared to cash of $144.8 million, cash equivalents
of $97.0 million and short-term investments of $317.1 million at January 2, 2010.

Additionally, we maintain a $90 million, multi-year revolving credit facility, which provides an
unsecured revolving line of credit for working capital purposes. Interest is payable at a rate
based on prime or LIBOR plus a spread that varies depending on the net worth ratios maintained. The
agreement contains certain net worth, current ratio and fixed charge coverage covenants and
provides certain restrictions on our ability to borrow, incur liens, sell assets and pay dividends.
The current agreement expires on May 31, 2013. As of April 3, 2010, we had no outstanding
borrowings under this agreement and were in compliance with all covenants.

We believe that our present cash position, together with cash generated from operations, short-term
investments and, if necessary, our available lines of credit, will be sufficient to meet
anticipated cash requirements during 2010.

During the second quarter of 2008, Fujitsu Services Limiteds (Fujitsu) contract as the prime
contractor in the National Health Service (NHS) initiative to automate clinical processes and
digitize medical records in the Southern region of England was terminated by the NHS. This had the
effect of automatically terminating our subcontract for the project. We are in dispute with
Fujitsu regarding Fujitsus obligation to pay the amounts comprised of accounts receivable and
contracts receivable related to that subcontract, and we are working with Fujitsu to resolve these
issues based on processes provided for in the contract. Part of that process requires resolution
of disputes between Fujitsu and the NHS regarding the contract termination. As of April 3, 2010,
it remains unlikely that the matter will be resolved in the next 12 months. Therefore these
receivables have been classified as long-term and represent the significant majority of other
long-term assets as of the first quarter ended April 3, 2010. While the ultimate collectability of
the receivables pursuant to this process is uncertain, we believe that we have valid and equitable
grounds for recovery of such amounts and that collection of recorded amounts is probable.

In February and March 2008, liquidity issues in the global credit markets resulted in the
progressive failure of auctions representing all the auction rate securities held by us. During
the fourth quarter of 2008, we entered into a settlement agreement with the investment firm that
sold us the auction rate securities. Under the terms of the settlement agreement, we received the
right to redeem the securities at par value during a period from mid-2010 through mid-2012. The
settlement is in effect a put-like instrument with a fair value generally equal to the difference
between the auction rate securities fair value and par value. In the fourth quarter of 2009, these
securities were reclassified to short term investments based on our intention to exercise the
put-like settlement feature and redeem the securities

within the next year. At April 3, 2010, we
held auction rate securities with a par value of $88.2 million and an estimated fair value of $80.1
million.

We anticipate that any future changes in the fair value of the put-like feature will be offset by
the changes in the fair value of the related auction rate securities with no material net impact to
the Condensed Consolidated Statements of Operations. We do not expect the auction failures to
impact our ability to fund our working capital needs, capital expenditures or other business
requirements.

The following table provides details about our cash flows in the first quarters of 2010 and 2009:

Three Months Ended

(In thousands)

2010

2009

Cash flows from operating activities

$

105,503

$

97,826

Cash flows from investing activities

(122,474

)

(40,712

)

Cash flows from financing activities

16,540

3,816

Effect of exchange rate changes on cash

(1,085

)

(6,244

)

Total change in cash and cash equivalents

$

(1,516

)

$

54,686

Free cash flow (non-GAAP)

$

52,879

$

36,365

Cash from Operating Activities

Cash flow from operations increased in the first three months of 2010 as compared to the same
period of 2009 due primarily to the increase in cash impacting earnings, slightly offset by a
decrease in cash provided by working capital. During the first three months of 2010 and 2009, we
received total client cash collections of $483.7 million and $457.7 million, respectively, of which
4% and 2%, respectively, were received from third party client financing arrangements and
non-recourse payment assignments. Days sales outstanding decreased to 89 days for the first quarter
of 2010 compared to 90 days in the fourth quarter 2009 and 102 days in the first quarter of 2009.
The majority of this year-over-year decline is driven by the reclassification of our Fujitsu
receivable to other long-term assets during the fourth quarter of 2009, which is not included in
our days sales outstanding calculation. Revenues provided under support and maintenance agreements
represent recurring cash flows. Support and maintenance revenues increased 2% in the first three
months of 2010 compared to the first three months of 2009. We expect these revenues to continue to
grow as the base of installed Cerner Millennium systems grows.

Our primary financing obligations are long-term debt repayments. In the fourth quarter of
2009, we commenced payment on the first of seven equal annual installments on our 5.54% Great
Britain Pound denominated Note Agreement as well as on the first of four equal annual installments
on our 6.42% Series B Senior Notes. Based on debts currently outstanding and current exchange
rates, we expect our debt repayments to approximate $25 million per year through 2012 and
approximately $15 million per year from 2013 through 2016.

Free Cash Flow

Three Months Ended

(In thousands)

2010

2009

Cash flows from operating activities

$

105,503

$

97,826

Capital purchases

(32,108

)

(43,173

)

Capitalized software development costs

(20,516

)

(18,288

)

Free cash flow (non-GAAP)

$

52,879

$

36,365

Free Cash Flow increased $16 million in the first three months of 2010 as compared to the same
period in 2009, which we believe reflects continued strengthening of our earnings quality. Free Cash
Flow is a non-GAAP financial measure used by management along with GAAP results to analyze its
earnings quality and overall cash generation of the business. The presentation of Free Cash Flow is
not meant to be considered in isolation, as a substitute for, or superior to, GAAP results and
investors should be aware that non-GAAP measures have inherent limitations and should be read only
in conjunction with our consolidated financial statements prepared in accordance with GAAP. Free
Cash Flow may also be different from similar non-GAAP financial measures used by other companies
and may not be comparable to similarly titled captions of other companies due to potential
inconsistencies in the method of calculation. We believe Free Cash Flow is important to enable
investors to better understand and evaluate our ongoing operating results and allows for greater
transparency in the review of our overall financial, operational and economic performance.

Recent Accounting Pronouncements

On January 3, 2010 we adopted Accounting Standards Update (ASU) 09-16, Accounting for Transfers of
Financial Assets, which among other things creates more stringent conditions for reporting a
transfer of a portion of a financial asset as a sale. The adoption of ASU 09-16 did not have a
material impact on our consolidated financial statements.

In January 2010, ASU 10-06, Improving Disclosures about Fair Value Measurements, was issued and
amends ASC 820, Fair Value Measurements and Disclosures. This ASU requires disclosures of
transfers into and out of Levels 1 and 2, more detailed roll forward reconciliations of Level 3
recurring fair value measurements on a gross basis, fair value information by class of assets and
liabilities, and descriptions of valuation techniques and inputs for Level 2 and 3 measurements.
We adopted ASU 10-06 during the first quarter 2010, which did not have a material impact on our
consolidated financial statements.

On February 24, 2010, ASU 10-09, Subsequent Events (Topic 855): Amendments to Certain Recognition
and Disclosure Requirements, was issued, which amends ASC 855-10 to eliminate contradictions
between the requirements of U.S. GAAP and the SECs filing rules. The amendments also discharge the
requirement that public companies disclose the date of their financial statements in both issued
and revised financial statements. ASU 10-09 is effective upon issuance and did not have a material
impact on our consolidated financial statements.

Evaluation of disclosure controls and procedures. The Companys Chief Executive
Officer (CEO) and Chief Financial Officer (CFO) have evaluated the effectiveness of the
Companys disclosure controls and procedures (as defined in the Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by the Quarterly Report (the
Evaluation Date). They have concluded that, as of the Evaluation Date, these disclosure
controls and procedures were effective to ensure that material information relating to the
Company and its consolidated subsidiaries would be made known to them by others within
those entities and would be disclosed on a timely basis. The CEO and CFO have concluded
that the Companys disclosure controls and procedures are designed, and are effective, to
give reasonable assurance that the information required to be disclosed by the Company in
reports that it files under the Exchange Act is recorded, processed, summarized and
reported within the time period specified in the rules and forms of the SEC. They have
also concluded that the Companys disclosure controls and procedures are effective to
ensure that information required to be disclosed in the reports that are filed or submitted
under the Exchange Act are accumulated and communicated to the Companys management,
including the CEO and CFO, to allow timely decisions regarding required disclosure.

b)

There were no changes in the Companys internal controls over financial reporting
during the three months ended April 3, 2010 that have materially affected, or are
reasonably likely to materially affect, its internal controls over financial reporting.

c)

The Companys management, including its CEO and CFO, has concluded that our disclosure
controls and procedures and internal control over financial reporting are designed to
provide reasonable assurance of achieving their objectives and are effective at that
reasonable assurance level. However, the Companys management can provide no assurance
that our disclosure controls and procedures or our internal control over financial
reporting can prevent all errors and all fraud under all circumstances. A control system,
no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been or will be
detected. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions;
over time, controls may become inadequate because of changes in conditions, or the degree
of compliance with policies or procedures may deteriorate. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.

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